HUD to Lenders: Don't Deny New Moms Loans

Becoming a mother is not a basis to deny or delay a loan for purchasing a home, says John Trasvina, the Department of Housing and Urban Development assistant secretary for fair housing and equal opportunity. Trasvina’s statement follows a recent HUD investigation into accusations that some lenders had refused to count new mothers’ disability payments they receive while on maternity leave as income when they apply for a home loan.

"Mortgage professionals may verify income and other resources and have eligibility standards, but they may not single out women on maternity leave to deny or delay loans that they are otherwise eligible for," Trasvina said.  

The investigation by HUD was sparked after a report in the New York Times last year that reported some lenders were discriminating against women taking maternity leave. Some lenders had claimed the disability payments the new mothers receive aren’t considered a stable source of income.

HUD, which enforces the Fair Housing Act, launched multiple investigations and has, so far, uncovered violations from two lenders. “If expectant or new mothers can demonstrate that they intend to return to work and can continue to meet the income requirements to qualify for the loan, they should not be denied a loan based on being on maternity leave,” according to HUD.

FHA-insured lenders are not allowed to inquire about future maternity leave. Also, “if a borrower is on maternity or short-term disability leave at the time of closing, lenders must document the borrower’s intent to return to work, that the borrower has the right to return to work, and that the borrower qualifies for the loan taking into account any reduction of income due to their leave,” according to HUD.

HUD is currently reviewing the procedures of Fannie Mae and Freddie Mac to ensure they are in compliance with the Fair Housing Act when verifying incomes of applicants taking maternity or parental leave. 

Source: “Lenders Warned Not to Discriminate Against Women on Maternity Leave,” Inman News (July 6, 2011) [Log-in required.]